We recently reiterated our Neutral recommendation on
Auxilium Pharmaceuticals, Inc.
) which carries a Zacks #3 Rank (short-term 'Hold' rating).
Auxilium Pharma's lead product Testim, a 1% testosterone gel,
continues to put in a solid performance. We expect Testim revenues
to continue growing based on encouraging clinical data and price
We are also positive on Auxilium Pharma's co-promotion agreement
) for Testim. With urology being a key focus area at Glaxo, Testim
sales should benefit from the additional promotional effort.
Glaxo's sales force started promoting Testim from mid-July 2012.
Auxilium Pharma believes that the additional sales effort will
increase the target audience to the top 25% of high-volume gel
writers. Meanwhile, reach to primary care physicians, urologists
and endocrinologists will increase with the additional detailing.
Testim revenues, which came in at $193 million in 2011, are
expected in the range of $245 - $255 million (old guidance: $225 -
$235 million) in 2012.
Auxilium Pharma's second marketed product, Xiaflex, is an
injectable enzyme (clostridial collagenase for injection) that
received approval in February 2010 from the FDA for the treatment
of Dupuytren's Contracture (DC), a condition that affects the
connective tissue in the palm known as palmar fascia.
Xiaflex' approval represents a major milestone for the company.
Xiaflex is being studied for additional indications like Peyronie's
disease (PD). Auxilium Pharma expects to file for approval for the
PD indication by year end. Meanwhile, Auxilium Pharma commenced a
phase Ib study in January 2012 for the treatment of cellulite
(edematous fibrosclerotic panniculopathy) - top-line results are
expected by year end. Xiaflex is also being evaluated for the
treatment of frozen shoulder syndrome with top-line results from
the phase IIa study expected in the first quarter of 2013. Xiaflex
is also being studied for the treatment of canine lipomas (phase
II) and human lipomas (phase I) with results due in the first half
While pleased with Testim's performance, we note that the
product faces stiff competition from
) AndroGel worldwide. Moreover, Testim is facing a patent
challenge. The entry of a generic version of Testim, which
accounted for 78.6% of Auxilium Pharma's revenues in 2011, would be
a major blow for the company.
With Testim facing a patent challenge, Auxilium Pharma's future
is heavily dependent on Xiaflex. Xiaflex' sales ramp, however, has
been disappointing so far. The company cut its 2012 Xiaflex global
sales guidance by $3 million to $65 - $77 million. The reduction in
Xiaflex' guidance reflects lower sales expectation from ex-US
markets due to reimbursement issues in some EU countries. The
unsuccessful commercialization of Xiaflex and inability to gain
approval for additional indications would weigh heavily on the
We expect investor focus to remain on the commercialization of
Xiaflex and its label expansion.
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